More loans as Buhari presents N13.08tr budget

• N404b lion’s share for works, housing in 2021
• Economists say oil benchmarks contradict prevailing realities
• Senate blames revenue agencies for shortfalls, borrowings

President Muhammadu Buhari, yesterday, presented 2021 appropriation bill to the joint session of the National Assembly.

The President said the N13.08 trillion proposal, tagged ‘Budget of Economic Recovery and Resilience’, would “accelerate our economic recovery process, promote social inclusion and strengthen the resilience of the economy.”

He explained that N5.20 trillion, an equivalent of 40 per cent of the proposed expenditure, would be funded by new borrowings, privatisation proceeds and drawdowns on multilateral/bilateral loans secured for specific projects and programmes.

“The deficit will be financed mainly by new borrowings totalling N4.28 trillion, N205.15 billion from privatisation proceeds and N709.69 billion in drawdowns on multilateral and bilateral loans secured for specific projects and programme,” he said.

The borrowing will add to the existing N31.08 trillion owed by federal and state governments.

Buhari admitted that the economy was facing serious challenges and would have fallen into recession at the end of the second quarter.

“The Nigerian economy is currently facing serious challenges, with the macroeconomic environment being significantly disrupted by the coronavirus pandemic. Real Gross Domestic Product (GDP) growth declined by 6.1 per cent in the second quarter of 2020. This ended the three-year trend of positive, but modest, real GDP growth recorded since the second quarter of 2017.

“The GDP growth is projected to be negative in the third quarter of this year. As such, our economy may lapse into the second recession in four years, with significant adverse consequences. However, we are working assiduously to ensure rapid recovery in 2021,” he said.

The President said the appropriation was in line with his submission that capital expenditure in 2021 would remain focused on completing many ongoing projects, rather than commencing new ones.

Works and Housing took the lion’s share of capital spending. The sector is allocated N404 billion. It is followed by transportation with N256 billion. Power and defence are given N198 billion and M121 respectively, while education gets N127 billion.

MEANWHILE, the President of the Senate, Ahmad Lawan, has raised concern over infractions by revenue-generating agencies, asking the executive to critically examine the process of revenue generation, collection and remittances.

He said the infractions were responsible for leakages in public revenues, limiting resources available for development.

Lawan said: “Recent interactions between our committees on Finance and National Planning and Economic Matters, and over 200 revenue-generating and collection agencies have revealed so many inefficiencies in their systems.

“It was revealed that the government lost so much money as a result.”

He blamed the leakages in revenue mobilization for the recent incessant borrowings by the government to meet its obligations.

“Due to inadequate revenue, the government has to borrow to finance its projects. It is equally important we diversify our sources of funding of our programmes and projects,” the Senate President said.

Lawan advocated alternative funding options saying: “We need to encourage and promote more private sector participation in developing some of our physical infrastructures. We could explore the Public-Private Partnership (PPP), Build Operate Transfer (BOT), and many other funding options.”

He promised that the National Assembly would give priority to the proposal, which the President said he would commence implementing on January 1, 2020.

He said: “In the exercise of this very important constitutional function, we will be thorough in our scrutiny. Our goal is to have a budget that will address our developmental needs in all ramifications.

“The National Assembly is again ready to pass the budget before the end of the year. This will continue to enable planning and enhance productivity and efficiency in the management and application of our resources.

“The implementation of the 2020 Budget has shown a remarkable improvement over the previous years. Certainly, the injection of funds for the various programmes and projects had helped our economy.

“We expect that before the end of this fiscal year, the 2020 budget would have been implemented 100 per cent. This will be a historic feat.”

The Speaker of the House of Representatives, Femi Gbajabiamila, said the National Assembly would give thorough and speedy consideration to the bill. He said members of the National Assembly would hold themselves to the highest standards of integrity during the budgetary process.

He said: “We have once again just experienced the beauty and majesty of our democracy – the laying of the budget proposal before the legislature for consideration and approval.

“We will collaborate with the ministries, departments and agencies (MDAs) of the executive to deliver a budget that meets the needs and matches the ambitions of the Nigerian people.

“And we will hold ourselves in the Legislature to the highest standards of integrity so that our deliberations and contributions to this process are motivated only by considerations of the best interests of the Nigerian people.”

BUT economists have faulted key parameters of the budget. Bala Zaka, an energy economist said the $40 per barrel of crude and 1.86 million barrels per day were unrealistic and contradictory to the current reality.

Zaka said: “I think it is more realistic to assume a price that is $8 less than the current price. Oil is about $40 per barrel. Why should anybody assume that the price remains at the same level next year? That benchmark is not a safe one.

“Even the production benchmark is also not in line with international market reality. It is the Organisation of the Petroleum Exporting Countries (OPEC) that fixes production quota, not individual countries. Why should your planning benchmark exceed the quota you currently get?”

In August, Nigeria’s production quota was 1.3 million barrels per day. It was reviewed upward to 1.4 million in September. Though the market is characterised by non-compliance, Nigeria is also guilty of disregard for the rules. Even though the Nigerian National Petroleum Corporation has reiterated the country’s readiness to comply.
Okey Onuchukwu, another economist, has described the budget as bogus and incapable of stimulating the projected three-per cent growth rate.

Onuchukwu, a former Director of the University of Port Harcourt Business School and professor of Econometrics, said the amount of deficit was a pointer that Nigeria was running an economy that is on a time bomb.

“The most important thing about this budget is the level of deficit. The government is going to generate about N7.89 trillion while the balance would be borrowed. That is not good for our economy because the liquidity of the Nigerian economy is quite low as compared to the Asian Tigers,” he said.

He said until the government addressed the deficit and matches it with how much liquidity the country needed as well as balances private sector credit needs with the government’s borrowing, the country might not see the desired positive growth.